MortgagesSep 14 2022

Lenders must do more for 'vulnerable' borrowers

twitter-iconfacebook-iconlinkedin-iconmail-iconprint-icon
Search supported by
Lenders must do more for 'vulnerable' borrowers
Photo: Antoni Shkraba via Pexels

Speaking as the latest Office for National Statistics revealed a slight drop in CPI for August, Richard Pike, chief sales and marketing officer software company Phoebus said lenders should do more to "alleviate" the increase in inflation.

As reported by FTAdviser, the ONS figures showed headline CPI at 9.9 per cent, down from a 40-year high of 10.1 per cent in July because of fuel prices falling from record highs.

But economists believe double-digit CPI (and even higher RPI) are still on the cards well into 2023. 

Pike said: "Even though we are seeing the cost of fuel coming down on forecourts across the country, everything else is becoming more expensive.

Lenders can be part of the solution to this unprecedented crisis.Ross Boyd, founder of Dashly.com

"We expect that the Bank of England will increase interest rates again next week, but it is difficult to see how, at this rate, it can do anything to alleviate increasing inflation.

"So for borrowers this is a time to take stock, as interest rates rise lenders will be forced into increasing mortgage rates."

The average mortgage rate has now passed 4 per cent as lenders pull their products, reprice and put new rates onto the market at record speed. 

Pike said this is putting more pressure on households, of which lenders should be mindful. 

He said: "The figures on arrears from the Bank of England yesterday (September 12) showed that the value of mortgages in arrears fell in the second quarter, which is something of a false positive.

"For lenders there are sure to be a number of vulnerable borrowers that are already starting to worry and will need to know where they can get the help they need, before things get too late.

"The onus of responsibility is with lenders now to ensure that vulnerable clients get that help.”

Energy solutions

Ross Boyd, founder of the always-on mortgage comparison platform, Dashly.com, agreed. He said: "Soaring energy bills are something the UK’s mortgage lenders have the chance to address head on.

"Lenders can be part of the solution to this unprecedented crisis and the issue of energy longer term."

According to Boyd, because there is a "significant energy efficiency deficit" for 75 per cent of residential properties, with borrowing capacity available for property owners, the industry needs to "start embedding energy-efficiency measures into people's mortgages where applicable".

Boyd explained: "It's in the interest of both the homeowner who will pay cheaper bills and the lender, as energy-efficient homes will retain value and also mean borrowers are less likely to default due to astronomical energy prices.

The housing market and the broader economy do not always move in sync.Nicky Stevenson, Fine & Country

"Now is the time for the mortgage industry to go green in earnest rather than continue along the current path of largely token green products."

Over time, he suggested government funding could be transitioned away from subsidies - estimated to be £20bn a year -which offset the cost of energy, to providing financial assistance for owners to invest in improving the energy efficiency of properties.

Boyd added: "Winter is coming and mortgage lenders have an opportunity to do something for the greater good of borrowers, but they need to act fast, ideally in tandem with the government.”

Commenting on the ONS inflation figures, Julian Jessop, economics fellow at think tank the Institute of Economic Affairs, said: "The small fall in UK inflation in August is welcome, but it is far too soon to sound the all clear. The headline rate remains close to 10 per cent and food price inflation is still rising.

"The Energy Price Guarantee means that consumer price inflation will probably peak at around 11 per cent in the coming months, before falling sharply next year."

House price conundrum

However, the Halifax Price Index for July indicated that house prices are by no means faltering in the light of soaring inflation and rising interest rates. 

This could be leading to a two-speed economy between the housing market and the broader UK economy, according to Fine & Country's managing director Nicky Stevenson. 

Stevenson said: "Just when you thought a slowdown was coming, the housing market accelerates back into overdrive. The rapid cooldown in prices predicted by many economists has simply failed to materialise."

She added: "Quite the opposite appears to be happening, and what is increasingly clear is that the housing market and the broader economy do not always move in sync".

It's as though the property market has uncoupled from the economic train.Shaw

Lewis Shaw, founder of Mansfield-based Shaw Financial Services, agreed that house purchase advice was still going strong despite the broader UK economic environment.

Shaw said: "First-time buyers have been leading the way in recent months.

"The volume of enquiries and calls we're getting remain at record levels, which is starting to feel a bit odd given the cost of living crisis and rising interest rates. It should be getting quieter, yet we are seeing the opposite.

"With two years of breakneck house price growth, it's as though the property market has decoupled from the economic train and is now freewheeling down the tracks without any brakes."

He added: "Let's hope for a gradual slowdown rather than crashing into the barriers.

"The fact that we're now seeing loans for prime borrowers nudge over 5 per cent may well start to see demand fall slightly and result in a cooldown rather than a crash." 

simoney.kyriakou@ft.com